In mathematics, a local martingale is a type of stochastic process, satisfying the localized version of the martingale property. Every martingale is a local martingale; every bounded local martingale is a martingale; however, in general a local martingale is not a martingale, because its expectation can be distorted by large values of small probability. In particular, a driftless diffusion process is a local martingale, but not necessarily a martingale.
Local martingales are essential in stochastic analysis, see Itō calculus, semimartingale, Girsanov theorem.
Read more about Local Martingale: Definition, Martingales Via Local Martingales
Famous quotes containing the word local:
“There is the falsely mystical view of art that assumes a kind of supernatural inspiration, a possession by universal forces unrelated to questions of power and privilege or the artist’s relation to bread and blood. In this view, the channel of art can only become clogged and misdirected by the artist’s concern with merely temporary and local disturbances. The song is higher than the struggle.”
—Adrienne Rich (b. 1929)